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Amazon to Stream TV Shows, Movies to Home-Delivery Customers

Feb. 22 (Bloomberg) -- Amazon.com Inc., the world’s largest online retailer, is offering instant streaming of more than 5,000 movies and TV shows to customers of its Amazon Prime home- delivery service starting today.

The service is an add-on to Amazon Instant Video, which offers more than 90,000 commercial-free movies and TV shows to buy or rent, the Seattle-based company said in a statement today. A membership to Amazon Prime, which costs $79 a year, is required to have access to the unlimited free streaming.

Amazon is competing with Netflix Inc. and Hulu Plus for online subscribers and is challenging traditional pay-TV services including Comcast Corp. and Time Warner Cable Inc. Last month, Amazon agreed to purchase the remaining shares of Lovefilm International Ltd., a U.K.-based DVD and Internet film- rental service, for $320 million.

“While Amazon’s initial video library is inferior to Netflix’s digital catalog, we believe Amazon’s library will continue to grow, especially considering its roughly $9 billion in cash,” Ralph Schackart, an analyst at William Blair & Co. in Chicago, said in a note today to investors. “We expect more digital video competition going forward.”

Amazon fell $3.93, or 2.1 percent, to $182.57 at 12:32 p.m. New York time in Nasdaq Stock Market trading. The shares had gained 3.6 percent this year before today. Netflix declined $11.54, or 4.9 percent, to $223.97, after earlier falling 5.7 percent, the biggest intraday drop in more than two months.

Online Streams

Total online video views jumped 45 percent in January from a year ago, according to a Nielsen report released earlier this month. Netflix, which introduced instant streaming of movies in January 2007, had more than 200 million online streams last month, up 38 percent from December, Nielsen said.

Netflix, based in Los Gatos, California, offers about 20,000 movies and TV shows on its streaming platform. Its streaming-only option, announced in November, costs $95.88 annually.

“The bottom line is that this offering from Amazon will not likely cause much of an exodus from Netflix in the beginning,” Ben Schachter, an analyst at Macquarie Capital in New York with an “outperform” rating on the shares, said in a note to investors. “This current offering should serve to remind Amazon’s most loyal customers that Amazon has a very strong offering of streaming rentals at $3.99 each.”

Of the 100 most popular movies currently being watched on Netflix, only one, “Syriana,” is available for free streaming to Amazon Prime Members, Schachter wrote. If Amazon’s library ever approached Netflix’s size, the company would take “significant” market share from Netflix, he wrote.